Even with an uptick in small-business lending and a spate of planned corporate expansions in the Ozarks, one local economist cautions that widespread local and national economic recovery will be a long time coming.
Loans backed by the U.S. Small Business Administration’s Springfield branch office increased 23 percent in value to more than $128 million through its fiscal 2011 third quarter, which ended June 30. The office reported 324 loans issued through three quarters, compared to 307 loans worth more than $104 million through the third quarter of fiscal 2010. Previously, annual SBA loan volumes had not exceeded $100 million since the Springfield office recorded $105.9 million in fiscal 2007, SBA branch manager Walter Cowart said.
On the jobs front, several companies in recent months have announced capital expansion and job creation plans in the Ozarks. Among them, Proformance Powertrain Products expects to invest $1.7 million in the local economy, expanding its Springfield remanufacturing production facility and adding 131 jobs. Roma of Springfield, a food-service distributor, plans to invest about $5.2 million in capital during the next five years and hire for 50 positions, and American Products LLC expects to invest $2.6 million and add 95 jobs in Strafford in the next five years.
Job creation conundrum News of those plans is welcome for U.S. Bank Regional President John Wilson, who said ongoing high unemployment is restraining the economy because jobs are fundamental to everything from consumer confidence and retail sales to residential development and construction.
According to the latest data from the Missouri Department of Economic Development, Missouri’s seasonally adjusted unemployment rate dropped a tenth of a point to 8.8 percent in June. Statewide, nonfarm payroll fell by 12,900 for the month, and while several regions of the state lost jobs, Springfield posted an increase of 1,600 jobs.
“If people are looking forward, they need to be keeping an eye on unemployment numbers, because when they finally start to come down, at least we’re hopeful that there’ll be some pent-up consumer spending that’s been on hold,” Wilson said.
While more jobs is a move in the right direction, job creation isn’t what will lead true economic recovery, however, according to Tom Wyrick, Missouri State University economics professor.
“Everybody says companies ought to be hiring workers, and that’s good for America,” Wyrick said. “But the thing is, people do hiring as the result of something else. They don’t go out and hire people in order to create a good economy. They first have an economy that’s working, and they have confidence in it, and then they go out and hire.”
The barrier to true recovery While SBA’s loan volume illustrates that banks are still cutting commercial loans, U.S. Bank’s Wilson said demand has slowed – partly because of stringent underwriting standards and also because borrowers are holding back.
“They’re just waiting for the right signal in the economy before they proceed,” Wilson said. “There are a lot of people who continue to watch what’s going on in Washington with respect to the debt ceiling (and) tax policy, fiscal policy. They’re waiting for a clear sign, and they haven’t got it yet.”
It’s that reticence, Wyrick said, that’s keeping full-blown economic recovery at bay. He noted that some people fail to realize that the economy isn’t faltering just because of the recession.
“We did have a recession, and we have recovered from that recession,” Wyrick said. “What we haven’t recovered from is the financial panic and its aftermath, which is a timid attitude by business managers and household managers.”
While he was quick to note that the panic itself has ended, he said people are stuck in the mode that cash is king.
“The whole world, other countries, too, right now, are trying to accumulate cash,” Wyrick said.
He said that mindset is logical, but there are widespread effects. As companies hold off on hiring, they don’t go out and build new facilities, and banks don’t make as many loans.
“They’re just sitting there with cash,” Wyrick said.
Changing direction While Wyrick said the fragile U.S. economy will recover, he anticipates a long process to restore full confidence.
“It’s an emotion, and emotion does what emotion wants, and logic cannot figure it out. It could start in a minute or maybe never,” Wyrick said, noting it wouldn’t take much to cause another setback. He added that global economics, such as tenuous conditions in Greece, as well as domestic challenges with the government struggling to pay its bills, chips away at confidence gains.
While bright spots such as small-business lending and jobs might not signal broad economic recovery, he said they can help build confidence.
“It shows people are expressing courage and confidence in the future,” he said. “If everybody were more confident (and) had more courage, and spent a little bit more, it would move us back in the direction of a stronger economy.”[[In-content Ad]]
A Springfield couple launched 24-hour fitness center Iron Knights Strafford; Springfield-based Meridian Title Co. LLC made its debut in Mount Vernon; and a ribbon-cutting ceremony was held in conjunction with the grand opening of Render Flooring LLC.
